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The ANZ-Roy Morgan Consumer Confidence Index lifted 5 points in December. It remains well short of 2017-19 levels, unlike business sentiment.
Consumer confidence lifted 5 points to 112 in December, with the current and future conditions indexes lifting by similar amounts. Consumer confidence is edging closer to its historical average of around 120.
“In a good sign for the retail sector, the proportion of people who believe it is a good time to buy a major household item lifted 7 points,” said ANZ Chief Economist Sharon Zollner.
Turning to the detail:
– Perceptions of current financial situations rose 3 pts to +4.
– A net 25% of consumers expect to be better off financially this time next year, down 2.
– Perceptions regarding the next year’s economic outlook lifted 12 points to
-6%. The five-year outlook rose 3 points to +18%.
– House price inflation expectations lifted another 0.3%pts to 6.7%. They are strongest in the South Island excluding Christchurch (8.3%) after a sharp 2.5%pt monthly lift.
– CPI inflation expectations eased 0.4%pts to 4.3%, but the last two months have been very high in a historical sense.
– It’s worth noting that a 6.7% house price inflation expectation is the strongest since the question was first asked in late 2010, though this indicator does tend to lag the market.
Households remain wary about whether it is a good time to buy a major household item. The latter has historically been the best retail spending indicator in the survey, but undershot last quarter. There are a few factors that could have contributed:
– catch-up spending (which should soon peter out),
– a reallocation of the money that would have been spent on international holidays (which will subside as travel bubbles are established next year), and/or
– the shortages and delays in ordering a wide range of durable goods due to shipping disruptions.
“The timing implications are different but these factors do all point to questionable sustainability of the current spending boom.
“In the New Zealand context, where COVID-19 was brought under control quickly and fiscal policy filled the income hole, the hit to the supply of goods is proving a lot more persistent than the interruption to demand.
“Inflation therefore bears watching, as it holds the key to future interest rates. The RBNZ won’t tighten policy in response to temporary supply-driven inflation, but at the margin it does reduce the odds of further OCR cuts further.
“The New Zealand economy has shown impressive resilience through a challenging year. 2021 won’t be smooth sailing, but we’re going into it in pretty good heart, all things considered.”
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